Crony Capitalism and Defense Spending

Today, I visited one of my favorite post-retirement haunts, the American Enterprise Institute, to hear a speech by Ashton Carter, the Deputy Secretary of Defense. Carter spoke on a wide range of defense issues, but the very first substantive point he made was that, in the current budgetary environment (and quite apart from the prospect of sequestration), Congress should not be forcing pet projects and systems on the Department of Defense. As Carter explained, for every pet project or system forced on it, the Department must forgo spending on projects and systems that fit its plans for the military of 2020.

Carter’s point made me think of a recent piece in the Daily Beast by Peter Schweizer called “Crony Capitalism Creeps Into the Defense Budget.” Schweizer complains that Congress is making military spending decisions that place extraneous considerations ahead of sound policymaking. He cites the recent rejection, by an overwhelming vote of 44-18 in the House Armed Services Committee, of a plan to close military bases. And he cites pressure from Capitol Hill for weapons systems that the Pentagon doesn’t want. Deputy Secretary Carter also mentioned both developments.

If this congressional pressure were based on a good faith disagreement about the merits, it would be understandable, though still potentially problematic. But Schweizer argues that the pressure is often the product of “crony capitalism,” not a clear-headed assessment of defense needs.

Compounding the problem is that members of Congress making these decisions have family members who serve as lobbyists for defense contractors. Congressman Bill Young (R-Fla.) is the chairman of the powerful appropriation subcommittee on the House Armed Services Committee. His daughter serves as a lobbyist for defense contractors, and in the past Young has steered money to contractors that employed his sons.

Members of Congress who sit on these committees can and often do own defense stocks. The Washington Post found in 2010 that 19 of the 28 members of the Senate Armed Services Committee held investments in military- and defense-related companies that did big business with the Pentagon. As Gordon England, who served as a senior Pentagon official in the George W. Bush administration told the Post, “I am frankly surprised they are allowed to have these investments. Every member of this committee has tremendous influence over every major contract at the Pentagon.”

There was a time, perhaps, when U.S. defense spending could accommodate both our strategic interests/defense needs and the political needs of our legislators. Ashton Carter and Peter Schweizer correctly insist that this time has passed.